These funds, which invest in markets such as Brazil,
Russia, and China, have returned 8.8% over the last year,
significantly outperforming the S&P 500, which has sunk
by 14.8%.

Still, low risk appetite among investors who have been
burned by crises in Argentina and Turkey in recent months,
and a five-year annual return of -5%, have kept prices
attractive.

In recent years investors fled emerging markets in
droves over concerns on corporate governance issues and
accounting standards, but the environment is slowly
becoming more supportive for long term investments in this
asset class as the economy starts to heal and emerging
markets take steps towards market reform and transparency,
according to Morningstar.

Recently, the giant California Public Employees
Retirement System announced plans to re-enter the
Philippine equity market, citing strides in market reform
and transparency (see
Philippines Back on CalPERS List
).

Since emerging market funds have shown double the
volatility of the S&P 500, investors should remain
committed for the long haul and ride out the risks of
political and economic turmoil, currency fluctuations, and
illiquid markets, analysts from Morningstar note.